{"id":17770,"date":"2026-08-07T13:39:42","date_gmt":"2026-08-07T06:39:42","guid":{"rendered":"https:\/\/investinasia.com\/blog\/?p=17770"},"modified":"2026-08-07T13:39:42","modified_gmt":"2026-08-07T06:39:42","slug":"is-hong-kong-really-tax-free","status":"publish","type":"post","link":"https:\/\/investinasia.com\/blog\/is-hong-kong-really-tax-free\/","title":{"rendered":"Is Hong Kong Really Tax-Free? What Foreign Business Owners Get Wrong About Offshore Claims"},"content":{"rendered":"<p><strong>Hong Kong&#8217;s offshore profits tax exemption<\/strong> allows a company to pay 0% profits tax on income that genuinely arises outside Hong Kong, under a territorial tax system set out in Section 14 of the Inland Revenue Ordinance. It is not a blanket exemption, and it is not automatic. A Hong Kong company still has to prove, transaction by transaction, that its profits arose somewhere else, and the Inland Revenue Department reviews that claim against how the business actually operates, not against what its incorporation documents say.<\/p>\n<div style=\"background: #f8f9fa; border-left: 4px solid #223666; border-radius: 0 8px 8px 0; padding: 16px 20px; margin: 24px 0;\">\n<p style=\"font-weight: bold; margin: 0 0 10px 0; color: #223666;\">Key Takeaways<\/p>\n<ul style=\"margin: 0; padding-left: 20px; line-height: 1.8;\">\n<li>Profits tax under Section 14 of the Inland Revenue Ordinance only applies if three conditions are all met, and Hong Kong&#8217;s own Departmental Interpretation and Practice Notes No. 21 sets out the test the IRD actually uses.<\/li>\n<li>The territorial source test and the Foreign-Sourced Income Exemption (FSIE) regime are two separate tests. FSIE, in force since 1 January 2023 and expanded from 1 January 2024, adds an economic substance requirement on top of the source test for four specific income types.<\/li>\n<li>A rejected or partially rejected offshore claim results in full profits tax on the disputed profits, plus the ordinary risk of interest and penalties for underpayment, and claims are reviewed against your first Profits Tax Return, due 18 months after incorporation.<\/li>\n<\/ul>\n<\/div>\n<h2>What Does &#8220;Hong Kong Is Tax-Free&#8221; Actually Mean?<\/h2>\n<figure id=\"attachment_15642\" aria-describedby=\"caption-attachment-15642\" style=\"width: 735px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"size-full wp-image-15642\" src=\"https:\/\/investinasia.com\/blog\/wp-content\/uploads\/2025\/07\/tax13.webp\" alt=\"Is Hong Kong Really Tax-Free? What Foreign Business Owners Get Wrong About Offshore Claims\" width=\"735\" height=\"490\" srcset=\"https:\/\/investinasia.com\/blog\/wp-content\/uploads\/2025\/07\/tax13.webp 735w, https:\/\/investinasia.com\/blog\/wp-content\/uploads\/2025\/07\/tax13-300x200.webp 300w\" sizes=\"(max-width: 735px) 100vw, 735px\" \/><figcaption id=\"caption-attachment-15642\" class=\"wp-caption-text\">Is Hong Kong Really Tax-Free? What Foreign Business Owners Get Wrong About Offshore Claims (pexels.com)<\/figcaption><\/figure>\n<p>Hong Kong operates a territorial tax system, not a zero-tax regime. Only profits that arise in or are derived from Hong Kong get taxed, currently at 16.5%, with a two-tier rate of 8.25% on the first HKD 2 million of assessable profit. That is a fundamentally different claim from &#8220;Hong Kong charges no tax,&#8221; and the gap between the two is exactly where the misconception this article is correcting comes from.<\/p>\n<p>Classic zero-tax jurisdictions like the British Virgin Islands or the Cayman Islands charge no corporate tax regardless of where a company&#8217;s activities actually happen. Hong Kong doesn&#8217;t work that way. A Hong Kong company can genuinely pay 0% on offshore profits, but only on the portion of profit the IRD accepts as foreign-sourced, and every dollar of Hong Kong-sourced profit is fully taxable at the standard rate. For a full picture of how Hong Kong&#8217;s 16.5% headline rate compares to the other nine Asian markets InvestinAsia covers, see <a href=\"https:\/\/investinasia.com\/blog\/corporate-tax-rates-in-asia\/\">InvestinAsia&#8217;s 2026 corporate tax comparison<\/a>.<\/p>\n<p>This is also why Hong Kong gets used as an offshore holding jurisdiction rather than a true tax haven. Businesses layer a Hong Kong entity above operations elsewhere in Asia specifically because the territorial system can exempt genuinely foreign-sourced income while still giving the company a transparent, internationally recognized legal base, a structure covered in more depth in <a href=\"https:\/\/investinasia.com\/blog\/onshore-vs-offshore-company-structure-in-asia\/\">InvestinAsia&#8217;s guide to onshore versus offshore company structures<\/a>. The exemption is real. It just has conditions attached, and those conditions are the part most &#8220;0% tax&#8221; pitches leave out.<\/p>\n<h2>What Are the Three Conditions the IRD Uses to Decide If You Owe Profits Tax?<\/h2>\n<p>Section 14 of the Inland Revenue Ordinance sets the legal foundation, and the IRD&#8217;s own Departmental Interpretation and Practice Notes No. 21 restates the test laid down by Lord Bridge in the landmark case CIR v Hang Seng Bank Ltd. Three conditions must all be satisfied before a profits tax liability arises:<\/p>\n<p>According to DIPN 21, a profits tax liability requires:<\/p>\n<ol>\n<li>The person must carry on a trade, profession, or business in Hong Kong.<\/li>\n<li>The profits charged must come from that trade, profession, or business as carried on in Hong Kong.<\/li>\n<li>The profits must arise in or be derived from Hong Kong.<\/li>\n<\/ol>\n<p>For most incorporated Hong Kong companies, conditions one and two are usually satisfied without much argument. A company incorporated to carry on business and actively trading is, by definition, carrying on business somewhere, and its profits come from that business. The entire fight over an offshore claim happens on condition three: where did the profit actually arise.<\/p>\n<p>The IRD doesn&#8217;t apply a single formula here. DIPN 21 describes what it calls the broad guiding principle, drawn from Hang Seng Bank and later cases: you look at what the taxpayer actually did to earn the profit and where they did it. For trading profits specifically, the operations test asks where the purchase contract and the sale contract were effected. If both happened outside Hong Kong, the profit is generally treated as fully offshore. If either happened in Hong Kong, the IRD&#8217;s starting assumption leans toward taxable, and the burden sits with the company to show otherwise.<\/p>\n<p>Not sure if your business model actually clears all three conditions?<\/p>\n<div style=\"background: #d5e6e5; border: 2px solid #223666; border-radius: 8px; padding: 20px 24px; margin: 32px 0; text-align: center;\">\n<p style=\"margin: 0 0 8px 0; font-size: 16px; font-weight: bold; color: #223666; text-align: center;\">Check Whether Your Structure Passes the Source Test<\/p>\n<p style=\"margin: 0 0 16px 0; color: #333; text-align: center;\">InvestinAsia reviews where your contracts, decisions, and operations actually happen before you file a claim, not after.<\/p>\n<div style=\"text-align: center;\"><a style=\"background: #223666; color: #fff; padding: 12px 28px; border-radius: 6px; text-decoration: none; font-weight: bold; display: inline-block;\" href=\"https:\/\/investinasia.com\/hk\/\">See Hong Kong Packages &amp; Pricing<\/a><\/div>\n<div style=\"height: 15px;\"><\/div>\n<div style=\"text-align: center;\"><a style=\"background: #25D366; color: #fff; padding: 12px 28px; border-radius: 6px; text-decoration: none; font-weight: bold; display: inline-block;\" href=\"https:\/\/wa.me\/6285286124490?text=Hello!%20I%20have%20a%20question%20about%20the%20three-condition%20profits%20tax%20test%20in%20Hong%20Kong%0A%0ASource%3A%20article%20%22Is%20Hong%20Kong%20Really%20Tax-Free%3F%20What%20Foreign%20Business%20Owners%20Get%20Wrong%20About%20Offshore%20Claims%22%20(SEO)\" target=\"_blank\" rel=\"noopener nofollow\">Chat with us for a FREE consultation<\/a><\/div>\n<\/div>\n<h2>How Does the IRD Decide Where Your Profits Actually Arise?<\/h2>\n<p>Where profits arise is a question of fact, not a checkbox on an application form. DIPN 21 is explicit that no single universal test covers every business, and that the IRD looks at the totality of what a company actually did. For a trading business, that means the IRD examines who negotiated the deal, who accepted the customer&#8217;s order, where goods were procured and shipped, and how payment was arranged, not just where a signature landed on a PDF.<\/p>\n<p>Court decisions back this up in ways that matter for how you structure your business. In Newfair Holdings Ltd v Commissioner of Inland Revenue, the Court of First Instance overturned an IRD assessment because the company genuinely did not carry on its profit-producing activities in Hong Kong, even though it was interposed in the transaction chain for group tax planning reasons. The court&#8217;s reasoning was blunt: what matters is what the entity did, not what role it was designed to play on paper. A company built purely to sit in a structure, with no real activity behind it, does not automatically fail the test, but a company that claims offshore status while its director quietly signs contracts in Hong Kong does.<\/p>\n<div style=\"background: #d5e6e5; border-left: 4px solid #223666; border-radius: 0 8px 8px 0; padding: 16px 20px; margin: 24px 0;\">\n<p style=\"font-weight: bold; margin: 0 0 8px 0; color: #223666;\">Notes from InvestinAsia Consultants<\/p>\n<p style=\"margin: 0; color: #333;\">The single most common gap we see in offshore claims isn&#8217;t a bad business model, it&#8217;s thin evidence. Clients hand us invoices and bank statements and expect that to be enough. The IRD wants a consistent story across contracts, correspondence, travel records, and who was physically where when a deal closed. A director who flies through Hong Kong for a layover and happens to email-sign a contract during that stopover can undo months of otherwise clean offshore positioning if there&#8217;s no record explaining it.<\/p>\n<\/div>\n<h2>What Is the Foreign-Sourced Income Exemption Regime, and When Does It Apply?<\/h2>\n<p>The Foreign-Sourced Income Exemption, or FSIE, is a separate test from the territorial source principle, and conflating the two is where a lot of the &#8220;Hong Kong is 0% tax&#8221; confusion actually starts. FSIE only applies to interest, dividends, disposal gains, and intellectual property income, and only to companies that are part of a multinational enterprise group. A single-country trading company with no group structure abroad generally sits outside FSIE altogether. The source test still governs its ordinary trading profits.<\/p>\n<p>For MNE entities that do fall inside FSIE&#8217;s scope, the regime has applied since 1 January 2023 and was expanded from 1 January 2024 to cover a broader range of disposal gains. Under the Inland Revenue Department&#8217;s own published guidance, specified foreign-sourced income received in Hong Kong is treated as Hong Kong-sourced and taxable unless the entity satisfies an economic substance requirement, a nexus requirement for IP income, or a participation requirement for dividends and equity disposal gains. There are no fixed headcount or office-size thresholds. The IRD applies what it calls an adequacy test, weighing whether the people, premises, and decision-making in Hong Kong are proportionate to the income involved.<\/p>\n<p>The requirement also splits by entity type. A pure equity-holding entity, one that only holds and manages shares in other companies, faces a lighter bar: adequate premises and staffing to hold and manage those equity interests. A non-pure equity-holding entity, one running broader operations, has to show real employees making real strategic decisions in Hong Kong, backed by genuine operating expenditure. Passing the source test doesn&#8217;t excuse you from this. Passing FSIE&#8217;s substance test doesn&#8217;t automatically make your income offshore either. They are two separate hurdles, and a company has to clear both where they apply.<\/p>\n<p>Worried your holding structure passes the source test but fails FSIE&#8217;s substance bar?<\/p>\n<div style=\"background: #d5e6e5; border: 2px solid #223666; border-radius: 8px; padding: 20px 24px; margin: 32px 0; text-align: center;\">\n<p style=\"margin: 0 0 8px 0; font-size: 16px; font-weight: bold; color: #223666; text-align: center;\">Get Your FSIE Exposure Reviewed Before You File<\/p>\n<p style=\"margin: 0 0 16px 0; color: #333; text-align: center;\">18+ years structuring foreign investment across Asia, including Hong Kong incorporation and FSIE positioning.<\/p>\n<div style=\"text-align: center;\"><a style=\"background: #223666; color: #fff; padding: 12px 28px; border-radius: 6px; text-decoration: none; font-weight: bold; display: inline-block;\" href=\"https:\/\/investinasia.com\/hk\/\">View Hong Kong Compliance Options<\/a><\/div>\n<div style=\"height: 15px;\"><\/div>\n<div style=\"text-align: center;\"><a style=\"background: #25D366; color: #fff; padding: 12px 28px; border-radius: 6px; text-decoration: none; font-weight: bold; display: inline-block;\" href=\"https:\/\/wa.me\/6285286124490?text=Hello!%20I%20have%20a%20question%20about%20FSIE%20economic%20substance%20requirements%20in%20Hong%20Kong%0A%0ASource%3A%20article%20%22Is%20Hong%20Kong%20Really%20Tax-Free%3F%20What%20Foreign%20Business%20Owners%20Get%20Wrong%20About%20Offshore%20Claims%22%20(SEO)\" target=\"_blank\" rel=\"noopener nofollow\">Or chat with our team on WhatsApp<\/a><\/div>\n<\/div>\n<h2>What Happens If Your Offshore Claim Gets Rejected?<\/h2>\n<p>An offshore claim is filed alongside your company&#8217;s first Profits Tax Return, due 18 months after incorporation, and the IRD&#8217;s review from there is neither instant nor guaranteed. Expect an enquiry letter within roughly six to eight weeks of filing, requesting supporting documentation and a detailed account of your operations, and a full determination can take anywhere from several months to well over a year for a complex case. When approved, offshore status typically holds for three to five years before it needs reconfirming, and the IRD can revisit a case earlier if the underlying facts change.<\/p>\n<p>Rejection, full or partial, means the disputed profits become fully taxable at the standard rate, applied retroactively to the year in question. That&#8217;s on top of whatever interest and penalty exposure applies to the resulting underpayment. Where a claim only partly succeeds, the IRD doesn&#8217;t treat it as all-or-nothing. It applies an apportionment approach, splitting the profits between Hong Kong-sourced and offshore based on the specific facts of the case, which is exactly why thin or one-sided documentation tends to produce partial losses rather than clean wins or clean rejections.<\/p>\n<p>Budgeting for a 0% tax outcome and then absorbing a full retroactive assessment is the scenario this entire article is trying to help you avoid. Getting the structure and the evidence right before the first filing is a materially different position than trying to reconstruct a story after the IRD has already asked its first question.<\/p>\n<h2>How Does Your Incorporation Structure Affect Your Offshore Claim Later?<\/h2>\n<p>The offshore claim conversation usually starts long after incorporation, but the decisions made at the incorporation stage shape how strong that claim can be. A Hong Kong private limited company needs a minimum of one shareholder, one director over 18, a mandatory company secretary, and a genuine physical registered office, requirements set out in the Companies Ordinance and covered in detail in <a href=\"https:\/\/investinasia.com\/blog\/hong-kong-private-limited-company-requirements\/\">InvestinAsia&#8217;s guide to Hong Kong private limited company requirements<\/a>. None of those, on their own, determine where your profits are sourced. But how you fill them does feed directly into the substance evidence an offshore claim, and a potential FSIE substance test, will eventually need.<\/p>\n<p>A registered address service satisfies the statutory office requirement, but it isn&#8217;t the same thing as demonstrating adequate premises for FSIE purposes if your company later brings in foreign-sourced dividend or interest income as part of an MNE group. The same goes for the corporate secretary role: it&#8217;s a compliance appointment under the Companies Ordinance, not evidence of where your commercial decisions are actually made. Founders who treat these as interchangeable with genuine operational substance often discover the distinction only once the IRD asks for it, a mix-up covered in more detail in <a href=\"https:\/\/investinasia.com\/blog\/company-secretary-and-designated-representative-in-hong-kong\/\">InvestinAsia&#8217;s guide to company secretary and designated representative requirements<\/a>.<\/p>\n<div style=\"background: #d5e6e5; border-left: 4px solid #223666; border-radius: 0 8px 8px 0; padding: 16px 20px; margin: 24px 0;\">\n<p style=\"font-weight: bold; margin: 0 0 8px 0; color: #223666;\">Notes from InvestinAsia Consultants<\/p>\n<p style=\"margin: 0; color: #333;\">Clients planning an offshore claim from the outset get a very different incorporation conversation from clients who are just registering a company. We ask where contracts will actually be negotiated, who will be traveling where, and whether directors will ever set foot in Hong Kong for signing purposes, before a single form gets filed. Retrofitting that story two years in, after a director&#8217;s travel pattern has already contradicted it, is a much harder position to defend.<\/p>\n<\/div>\n<h2>How Much Does It Actually Cost to Register and Maintain a Compliant Hong Kong Company?<\/h2>\n<p>Registration itself is the smaller number in this picture. Through InvestinAsia&#8217;s Hong Kong incorporation packages, an Essential package covering incorporation, government fees, stamp duty, one year of corporate secretary service, and a Business Registration Certificate runs USD 2,644. A Complete package, which adds a year of registered address, banking assistance with both neobanks and traditional institutions, and accounting and tax filing for up to 600 transactions a year, runs USD 5,109.<\/p>\n<div style=\"overflow-x: auto;\">\n<table>\n<thead>\n<tr>\n<th>Package<\/th>\n<th>Total Fee<\/th>\n<th>What&#8217;s Included<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Essential<\/td>\n<td>USD 2,644<\/td>\n<td>Incorporation, government fee, stamp duty, Certificate of Incorporation, Articles of Association, 1 year corporate secretary, Business Registration Certificate (incl. HKD 2,200 government fee), neobank assistance<\/td>\n<\/tr>\n<tr>\n<td>Complete<\/td>\n<td>USD 5,109<\/td>\n<td>Everything in Essential, plus 1 year registered address\/virtual office, neobank and traditional bank assistance, accounting and tax filing for up to 600 transactions a year<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>Neither figure covers what comes after year one, and this is the part budgets for an offshore claim most often miss. Every Hong Kong company, trading or dormant, files an annual CPA audit and annual return regardless of offshore status. That runs roughly USD 2,031 a year for a dormant company, rising to around USD 3,406 a year once revenue is active but still under HKD 5 million. A rejected or partially rejected offshore claim adds a retroactive tax bill on top of these recurring costs, which is exactly why the review belongs before you file, not after. The full remote registration process, including which steps can and can&#8217;t be done without traveling to Hong Kong, is covered step by step in <a href=\"https:\/\/investinasia.com\/blog\/how-to-register-a-company-in-hong-kong\/\">InvestinAsia&#8217;s guide to registering a Hong Kong company from abroad<\/a>.<\/p>\n<p>Planning to claim 0% tax on your Hong Kong profits?<\/p>\n<div style=\"background: #223666; border-radius: 8px; padding: 24px; margin: 32px 0; text-align: center;\">\n<p style=\"margin: 0 0 6px 0; font-size: 18px; font-weight: bold; color: #fff; text-align: center;\">Review Your Offshore Eligibility Before You File<\/p>\n<p style=\"margin: 0 0 20px 0; color: rgba(255,255,255,0.75); font-size: 14px; text-align: center;\">18+ years structuring foreign investment across Asia, including Hong Kong incorporation and offshore positioning.<\/p>\n<div style=\"text-align: center;\"><a style=\"background: #fff; color: #223666; padding: 12px 32px; border-radius: 6px; text-decoration: none; font-weight: bold; display: inline-block;\" href=\"https:\/\/investinasia.com\/hk\/\">See Hong Kong Packages &amp; Pricing<\/a><\/div>\n<div style=\"height: 15px;\"><\/div>\n<div style=\"text-align: center;\"><a style=\"background: #25D366; color: #fff; padding: 12px 28px; border-radius: 6px; text-decoration: none; font-weight: bold; display: inline-block;\" href=\"https:\/\/wa.me\/6285286124490?text=Hello!%20I%20want%20a%20review%20of%20my%20Hong%20Kong%20offshore%20tax%20claim%20eligibility%0A%0ASource%3A%20article%20%22Is%20Hong%20Kong%20Really%20Tax-Free%3F%20What%20Foreign%20Business%20Owners%20Get%20Wrong%20About%20Offshore%20Claims%22%20(SEO)\" target=\"_blank\" rel=\"noopener nofollow\">FREE consultation with our team<\/a><\/div>\n<\/div>\n<p><strong>References<\/strong><\/p>\n<p><strong>1.<\/strong> Inland Revenue Department, Government of the Hong Kong SAR. Departmental Interpretation and Practice Notes No. 21 (Revised): Locality of Profits. Retrieved from<br \/>\nhttps:\/\/www.ird.gov.hk\/eng\/pdf\/dipn21.pdf<\/p>\n<p><strong>2.<\/strong> Inland Revenue Department, Government of the Hong Kong SAR. Foreign-sourced Income Exemption. Retrieved from<br \/>\nhttps:\/\/www.ird.gov.hk\/eng\/tax\/bus_fsie.htm<\/p>\n<p><strong>3.<\/strong> Woodburn Accountants &amp; Advisors. Hong Kong&#8217;s Offshore Profits Tax Exemption Is Still Real in 2026, But the IRD Is Rejecting More Claims. Retrieved from<br \/>\nhttps:\/\/www.woodburnglobal.com\/post\/hong-kong-s-offshore-profits-tax-exemption-is-still-real-in-2026-but-the-ird-is-rejecting-more-clai<\/p>\n<p><strong>4.<\/strong> Statrys. What Counts as &#8216;Substance&#8217; for Offshore Tax Claims in Hong Kong? Retrieved from<br \/>\nhttps:\/\/statrys.com\/hk\/guides\/tax-system-and-rates\/economic-substance<\/p>\n<p><strong>5.<\/strong> vOffice. Hong Kong Company Registration Service (Limited Company). Retrieved from<br \/>\nhttps:\/\/voffice.co.id\/en\/services\/company-registration-hongkong<\/p>\n<p><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ItemList\",\n  \"name\": \"Three conditions for Hong Kong profits tax liability under Section 14\",\n  \"itemListElement\": [\n    {\"@type\": \"ListItem\", \"position\": 1, \"name\": \"The person must carry on a trade, profession, or business in Hong Kong.\"},\n    {\"@type\": \"ListItem\", \"position\": 2, \"name\": \"The profits charged must come from that trade, profession, or business as carried on in Hong Kong.\"},\n    {\"@type\": \"ListItem\", \"position\": 3, \"name\": \"The profits must arise in or be derived from Hong Kong.\"}\n  ]\n}\n<\/script><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Hong Kong&#8217;s offshore profits tax exemption allows a company to pay 0% profits tax on income that genuinely arises outside Hong Kong, under a territorial tax system set out in &hellip; <\/p>\n","protected":false},"author":1,"featured_media":17771,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[89],"tags":[],"class_list":["post-17770","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-hong-kong"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Is Hong Kong Really Tax-Free? The Offshore Claim Myth Explained | InvestinAsia<\/title>\n<meta name=\"description\" content=\"Hong Kong isn&#039;t automatically 0% tax. See the IRD&#039;s three-condition test, FSIE rules, and real costs before you file an offshore claim.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/investinasia.com\/blog\/is-hong-kong-really-tax-free\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is Hong Kong Really Tax-Free? The Offshore Claim Myth Explained | InvestinAsia\" \/>\n<meta property=\"og:description\" content=\"Hong Kong isn&#039;t automatically 0% tax. 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